In 2000, George W Bush ran for president as a "Compassionate Conservative." It was an attempt to break from the image of traditional conservatives as cold and uncaring - even downright mean and make a dent in the advantage modern day liberalism had (and still has) in perceived compassion. It worked (in terms of getting him elected) because in spite of media attempts to paint him as a buffoon, people could tell that he loved his country and had genuine concern for people.
The first problem with the new brand is that it paints traditional conservatives as "cold and uncaring - even downright mean." Policy (liberal or conservative) is dispassionate. Well meaning individuals can hold to either policy. Decisions about which policy to follow should be based on their merits, not the personality of the person proposing them.
The next problem is that once elected, compassionate conservatism looked alot like diet liberalism in practice (at least fiscally). While President Bush made great headway in the area of tax cuts - which did provide a boon for the economy - his drastic spending increases (even discounting for the defense budget) erased a budget surplus in front of the nations eyes.
Now, on the whole, I believe President Bush to have been an excellent president (hows that for an unpopular position). He has shown himself a principled conservative on social issues, but he and the congressional Republicans have done the conservative platform no favors when they abandoned the principles of limited government.
The way I see it, Republicans in general and conservatives in particular, have two tasks at hand:
1) Educate the public as to why conservative principles make sound public policy and
2) Convince the electorate that they are going to be the party of limited government again.
The big question is can it be done? If so, how should we start?